- New-build prices exceed expectations
- Firm has good visibility into new financial year
- Analysts see valuation as compelling
Housebuilder Bellway (BWY) released a reassuring trading update for the year to the end of July supported by record housing revenue and a record number of home completions.
The firm also posted a further increase in its operating margin due to site efficiencies and completions from more recently acquired land.
NO SIGN OF A SLOWDOWN
Despite fears of the new-build housing market succumbing to the cost of living crisis, and a recent dip the Halifax house price index, Bellway said it had continued to see strong demand across the country with a 6.9% increase in its weekly reservation rate.
Revenues for the year to July climbed 13% to over £3.5 billion, a new record, while completions increased to 11,198 homes, also a new company record.
The average selling price rose 2.6% to £314,400, well ahead of the firm’s most recent forecast of £305,000 and comfortably above the average UK price of £293,221 reported by the Halifax and £271,209 reported by the Nationwide.
The company described the current market as ‘robust, underpinned by good mortgage availability and low levels of unemployment across the country’.
It added: ‘Overall, mortgage availability is healthy and while the availability of 95% loan-to-value products remains limited, some lending institutions are gradually reintroducing these products for new build properties.
‘Although customer uptake is currently low, this provides some encouragement regarding the availability of alternative financing arrangements as the Help-to-Buy scheme draws to a close for new reservations later this calendar year.’
The firm’s order book of 7,223 homes, with a market value of £2.11 billion, together with its plans to open more sales outlets, puts the group ‘in an excellent position to deliver another record year of volume output’ according to chief executive Jason Honeyman.
EXPERT VIEW
Analysts at Numis raised their full year pre-tax profit forecast by 3% to £645 million to take account of higher selling prices and nudged up their June 2023 forecast by a tentative 1.5% to £680 million.
They argue the firm has ‘a higher level of visibility than it has ever had’ thanks to its forward sales position, yet at the same time it has one of the lowest-rated shares in the sector, trading on 0.74 times price to tangible net asset value (after allowing for c.£500m of fire-safety provisions), a price to earnings multiple of 5.6 times and a yield of 6.8% for Dec 2023.
